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| Author: | Hoppe, H.C. Lee, I.H. |
| Title: | Entry deterrence and innovation in durable-goods monopoly |
| Journal: | European Economic Review
2003 : DEC, VOL. 47:6, p. 1011-1036 |
| Index terms: | Consumer durables Monopoly Entry conditions Innovation Models |
| Language: | eng |
| Abstract: | This paper investigates the efficiency of innovation investments in a durable-goods monopoly when a potential entrant threatens to innovate as well. It is shown that the durability of the good endows the monopolist with the power to discourage rival innovation since current sales alter the demand for new generation of the good. The equilibrium is therefore determined not only by the incentive for intertemporal price discrimination in durable-goods monopoly, but also by the incumbent's concern for maintaining the technological leadership. It is demonstrated that entry deterrence followed by no innovation always implies underinvestment in innovation. |
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